A $1.8 Million 401(k) and Social Security Coming Up? Drain It Before 70 to Dodge the IRMAA Cliff

Key Points:

• A 64-year-old couple with $1.8 million in traditional 401(k)s is advised to delay Social Security claiming until age 70 while drawing down their 401(k) first to avoid high Medicare premiums caused by income thresholds.
• Required minimum distributions (RMDs) combined with Social Security benefits at full retirement age can push modified adjusted gross income (MAGI) above $218,000, triggering costly Medicare IRMAA surcharges.
• By withdrawing from the 401(k) between ages 64 and 70 at controlled tax rates, the couple can reduce their pre-tax balance, lowering future RMDs and keeping income below IRMAA thresholds.
• Delaying Social Security claiming increases benefits by 24% before cost-of-living adjustments, effectively purchasing a larger survivor benefit while managing tax exposure during the pre-claim period.
• This strategy involves carefully mapping MAGI against IRMAA thresholds, optimizing 401(k) withdrawals and potential Roth conversions, and locking in Social Security claims at 70 to minimize Medicare surcharges and maximize lifetime income.